By Samuel Quek
Asia's best banks are strategically positioned to play key roles in B2B commerce, says Goldman Sachs report
12 July 2000 - Banks in Asia have the potential to play key roles in enabling B2B commerce, says investment banking and securities firm, Goldman Sachs.
Moving core competencies online, such as payments, cash management, international trade and counterparty risk-taking, would enable the banks to use B2B rollouts to forge stronger ties with their corporate customers as well.
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The report said that most banks in Asia are still focused on B2C strategies, though some have made "limited and tentative moves on the B2B front", like their counterparts in the US and Europe three years ago.
The report highlighted Citibank, HSBC, and Standard Chartered to be leaders, being large, multi-market banks that also have operating capabilities.
Other banks taking the lead in B2B efforts include UOB, DBS Bank, and OCBC in Singapore; UWCCB and Chinatrust in Taiwan; and Bank of Asia and Siam Commercial Bank in Thailand.
Goldman Sachs also noted that banks enjoy competitive advantages as B2B players:
- As trusted parties - issuing and authenticating digital certificates
- As financial intermediaries already having a number of business relationships - they will aid in organizing e-marketplaces
- As favored gateways for electronic billing (or e-payments gateways), as they are able to operate and control the payment processing and infrastructure
- As experienced in exception management in disputes and claims, transaction management, fraud mitigation and assessment - processing of transactions after the deal has been cut
Threats and opportunities for incumbents
The report noted that although B2 commerce extends or opens up new roles and revenue opportunities for banks, there are also risks involved
As infrastructure suppliers, e-payments providers, payment or performance guarantors, and providers of supporting financial services, banks engaged in B2B will be empowered to develop stronger relationships with customers - if the implementation establishes an end-to-end processing solution between bank, buyer and seller, as this would put banks on the inside of the supply chain.
B2B also raises risks of further marginalization and pressure to merge - especially for banks that lack the size, critical mass and geographical footprint large enough to assume a core B2B role.
However, success in B2B is not just dependant on size and scale, but also requires proactiveness and creativity. While banks might have an edge, given their traditional core competencies, they should not automatically assume an assured role as e-commerce enablers.
E-marketplace providers will want to take over many financial services traditionally supplied by banks. Regulators can provide a payment settlement infrastructure to non-banks. Electronic money can be transferred and settled without the involvement of banks. These are the competition that banks may have to deal with.
Goldman Sachs is a global investment banking and securities firm, providing a range of investing, advisory, and financing services worldwide to a client base which includes corporations, financial institutions, governments, and high net-worth individuals.
Founded in 1869, it is one of the oldest and largest investment banking firms in the world, and is headquartered in New York with offices in London, Frankfurt, Tokyo, Hong Kong and other parts of the world.